Sales Turnover Policy

What is Sales Turnover Policy?

A sales turnover policy (STOP) is a type of marine insurance in which a business is covered for all transits necessary to generate sales.

With STOP, the policyholder (the business) needs only to disclose sales turnover data, rather than declaring every individual consignment movement as is customary with other marine policies. This kind of coverage alleviates the task of managing an abundance of paperwork, concurrently offering policyholders notable savings on insurance premiums. The premium's magnitude is influenced by the sales volume. Policyholders are granted the flexibility to pay premiums either quarterly or semi-annually instead of on a monthly basis. If the sum insured under the policy isn't wholly utilized or consumed, the client possesses the prerogative to request a premium refund from the insurer. This policy is optimally suited for industries wherein the creation or manufacturing of the final product for sale mandates numerous internal transits.

Like other marine cargo insurance policies, a sales turnover policy provides coverage against various risks that cargo may encounter during transportation. The most frequently observed causes for cargo loss or damage during transit encompass explosions, fires, hijackings, collisions, accidents, and overturns.

Features of Sales Turnover Policy:

Offers uninterrupted coverage on a global scale.
The policy can be tailored according to specific business needs.
Presents various premium payment options: quarterly, semi-annually, or annually.
Demands less paperwork. The insured isn't obligated to tender a periodic declaration of movements. It's adequate to present sales data from the preceding month or quarter.
Ensures coverage for both the import and export of goods.
Supplementary coverage, such as intermediate storage cover, can be procured through endorsements.
Given that the policy encompasses multiple transit phases under a singular policy, it results in significant premium savings.
The insurance coverage commences from the moment the raw material is acquired and continues through all transportation phases and storage at intermediary sites, culminating at the final destination or the juncture where the customer's liability concludes.

Why do you need Sales Turnover Policy?
A marine sales turnover policy is an apt choice for industries where creating or manufacturing the final product for sale necessitates numerous internal transits. The policy's intent is to shield businesses from financial setbacks stemming from unforeseen events such as fire, theft, or damage to stock, equipment, or property. It offers fiscal safeguarding for the company's assets and operations, providing coverage premised on the insured's annual sales turnover. Unlike policies that cover only a specific type of transit, this policy encompasses domestic purchasing of goods and services, exports, transfers between factories, warehouses, or depots, domestic sales, imports, etc.

Given that the sales turnover policy encapsulates multiple transit stages under a singular policy, it results in notable premium savings. By accurately projecting sales turnover and selecting apt coverage, businesses can sidestep excessive expenditure on superfluous coverage. As the sales turnover policy operates on a consumption basis, insurers have the discretion to present alluring payment alternatives to clients, such as the option of paying premiums quarterly or biannually, rather than upfront. This versatility aids the insured in enhancing cash flow management. Furthermore, by amalgamating all marine insurance risks under one policy, STOP affords convenience and coherence for the insured, streamlining the administrative procedure and simplifying claims management.

What will Sales Turnover Policy cover?

The coverages provided by a sales turnover policy may be categorized as mentioned below:

Domestic Purchase of Raw Materials, Consumables, etc

The coverage includes protection for raw materials, consumables, and other goods procured domestically. This means that when a business purchases these items and they are in transit to the business's location, they are covered against risks such as damage during transportation, theft, accidents, and unforeseen events that may lead to loss or damage.

Imports and Customs Duty

A STOP policy can include coverage for customs duties paid in the event of a loss to imported goods. This means that if the insured goods suffer a covered loss during transit, the policy can help reimburse the customs duties paid, reducing the financial impact on the business.

Inter-depot, Inter-factory, and Inter-warehouse Transfer

A STOP policy can extend its protective reach to cover the movement of goods between different depots or storage locations within a company's network. Thus, it ensures that goods remain insured during these movements, safeguarding against potential damage, theft, or loss. It also encompasses the transit of raw materials, semi-finished products, or finished goods between multiple factory locations or warehouses of a business.

Domestic Sales of Finished Goods

A STOP policy extends its protective coverage to the domestic transit of finished goods. This means that when finished products are being transported from the manufacturing facility or warehouse to customers, distributors, or retailers within India, they are covered against the risks and perils during transit. This includes coverage for goods in transit via road, rail, or other means of domestic transportation.

Export Sales (FOB/CIF)

This policy is designed to safeguard businesses engaged in export sales, whether on a free-on-board (FOB) or cost, insurance, and freight (CIF) basis. When sales are conducted on a FOB basis, the coverage begins when the goods are placed on board the vessel at the Indian port of shipment. The policy ensures that the goods are protected during their voyage to the foreign port. Under CIF sales, the coverage extends further, including not only the voyage but also for the goods during transit and until they are delivered to the overseas buyer's destination.

Theft, Pilferage & Non-delivery (TNPD)

These policies provide basic coverage against these specific perils that can occur during the complex journey of goods from the point of origin to the destination. This coverage ensures that businesses are compensated for the value of goods that are stolen, pilfered, or not delivered to their intended destination.

Explosion

In the event of an explosion or similar event, explosion coverage protects your shipment as well as any cargo or property on board. In addition, it covers the costs of salvage and recovery efforts incurred because of the explosion, and liability for damages to other carriers and property.

Temporary Storage Cover at Intermediate Locations

This policy offers comprehensive coverage not only during the transit of goods but also during temporary storage at intermediate locations. This means that the goods remain protected even when they are not in motion and are awaiting further transportation or processing.

Natural Calamities

In the event of natural disasters like storms, hurricanes, earthquakes, or tsunamis, this coverage protects against damages or losses to the cargo.

What's not covered?

Here are some common exclusions typically found in a sales turnover Policy in India:

Normal Wear & Tear, Volume & Weight Loss, Liquid Leakage

Losses or damages that occur due to weight loss, volume loss, liquid leaks, or normal wear and tear are not covered for insured items.

Inadequate Packaging

Loss resulting from the insured's carelessness or failure to exercise reasonable precautions when packaging or preparing the insured item for delivery is not covered by the policy.

Intentional or Wilful Activities by The Insured

This insurance policy does not cover losses or damages brought on by the insured's or their representative's intentional or wilful actions, such as purposefully damaging their own cargo.

Inherent Nature

Loss or damage resulting from the inherent characteristics or flaws of the insured item is not covered.

Default in Financial Commitments

This exclusion from coverage applies to losses or damages brought on by a business failing to fulfill its financial commitments (for instance, by default on a loan). The exclusion frequently comes into play, for instance, when an insured business is unable to carry out its contractual responsibilities for the delivery or transportation of the goods because of a lack of funds.

Who needs Sales Turnover Policy?

A sales turnover policy is relevant and advantageous for a broad spectrum of businesses spanning various industries. Here are some types of businesses that stand to gain from this policy:

Small, medium, and large businesses
Manufacturing companies
Exporters and importers
Retailers
Startups
Service providers
FMCG (fast-moving consumer goods) companies
Food and hospitality industry
Automobile industry

FAQs

What is an annual turnover?

Annual turnover, often referred to simply as "turnover," is a financial metric representing the total revenue generated by a business within a specific accounting year. It is a critical measure of a company's financial performance and reflects the total value of goods sold or services rendered during the year.

What are sales turnover and net turnover?

Sales turnover represents the total revenue generated by a business from its primary operations, such as the sale of goods or services, before deducting any expenses. In contrast, net turnover, also known as "net sales" or "revenue," is the revenue that remains after deducting various costs and deductions, including returns, discounts, and allowances, from the gross turnover.

What are the different types of sales turnover?

Here are some common types of sales turnover:

Gross Turnover
Net Turnover
Operating revenue
Non-operating revenue
Domestic sales turnover
Export Sales turnover
Retail Sales turnover
Wholesale sales turnover

What are the other names for sales turnover?

Sales turnover is often referred to by other names such as "turnover" or "gross turnover".

What is an umbrella policy in marine insurance?

An umbrella policy in marine insurance, often called umbrella insurance, is an excess liability insurance that acts as a safeguard when the limit of your primary online cargo insurance is reached. Acquiring an umbrella cover helps businesses obtain marine insurance with more extensive coverage. Essentially, marine insurance's umbrella liability coverage protects against losses or damages to cargo while it is in transit and under the care of logistics companies, warehouses, cargo handlers, container ports, etc.